That last part is the sticker. Redcloak has no worries about torture and killing and he’s yukked it up with Xykon before over others’ pain. He just doesn’t extend that to goblinoids any longer. But saying “I’m cool with torturing others for laughs, just not goblins” doesn’t exactly earn you a “Lawful Neutral” on your alignment line. Likewise, he allies with a chaotic evil psychopath to achieve his goals. Roy had the excuse that he’s a restraining influence on Belkar – Redcloak enables Xykon and helps Xykon achieve greater acts of depravity. Assuming Stickworld goblin society is akin to D&D goblin society in general, it’s one based on subjugation of the weak, torture, enslaving your foes, etc and that’s the world Redcloak wants to bring about.
Redcloak is like Malack: they have (had) some qualities that, isolated, are good ones to have and thus allow the reader to relate to them a little more, but both definitely earn their Evil status.
For me, Redcloak is far worse. Xykon’s just an antagonist; Redcloak is the true villain. He’s the manipulator, the power behind the scenes. And he has no compunctions about using Xykon.
Portal. GLaDOS goes from villain of the first game to reluctant companion in the second finally developing with her having a measure of appreciation (or at least respect) for you at the conclusion.
As for badly done transformations… Darth Vader never showed any signs of having a heart or a conscience. Luke claims to sense goodness and conflict in his Dad, but we have to take Luke’s word for it because Vader never displayed anything like love, kindness or humanity until the moment he dropped the Emperor down the shaft.
I thought that Thomas’s character transformation was well done… largely because the actor was quite good.
Everyone else’s reactions to him, however… not so much. He was caught stealing from the household, and was also a massive prick. No way everyone forgives and forgets so quickly.
(If we were really studying this topic in depth, that would be a good division point, actually… how the character changes internally while switching from villain to sympathetic, and how other characters react.)